Poverty and despair are fuelling the uprisng

These developments come ahead of a visit to the region by the new US Secretary of State, Colin Powell.

US officials from Mr Powell downwards have been calling for the release of funds for the Palestinians in a number of discussions with both the incoming and outgoing Israeli administrations.

Economic suffering

Israel has withheld an estimated $54m in sales taxes and custom duties collected for the Palestinian authorities.

Israel's Prime Minister-elect Ariel Sharon, has said he is interested in relieving the economic suffering of ordinary Palestinians, but has linked this to reductions in violence.

The Bush administration appears to be asking Israel to take the initiative, amid fears that economic collapse in the Palestinian territories could increase instability further.

The issue goes to the heart of the debate over the extent to which economic hardship is fuelling Palestinian discontent.

Difficult discussions

The Bush administration, having hinted at a more hands-off approach to the Israeli-Palestinian confrontation than its predecessor, also appears to be taking quite an active line now.

To some extent, it has been disconcerted by the upsurge in violence since Mr Sharon's election.

While US officials are said to understand Israeli concerns that the Palestinian leadership may be manipulating the economic situation and should take more steps to rein in the violence, there could be difficult discussions with the Israelis ahead.